A successful auction of Italian government bonds today has highlighted an apparent paradox — that, while other debt-laden southern European countries are being roasted in the markets, Silvio Berlusconi's Italy, with the biggest public debt of all, has so far been spared.

As a share of GDP, Italy's state borrowing, at more than 115%, is the world's seventh highest – higher than Greece's. Yet while investors were demanding a yield of 9.4% on 10-year Greek bonds, they were content with a return of less than 4.1% on their Italian equivalents.

Today's €7.7bn (£6.6bn) sale was the first by one of the eurozone's under-fire members since the ratings downgrades inflicted on Greece, Portugal and Spain. Demand outstripped supply by ratios of between 1.4 and 1.8 to one — better than the recent average in comparable Italian debt auctions. "Italy has not been the big culprit in recent years", said Giacomo Vaciago, professor of political economy at the Catholic University of Milan. "Though we have the image of a country with a lot of public debt, the present level is lower than it was 10 years ago."

Berlusconi's last government, from 2001 to 2006, was plagued by scares over its finances. But since he returned to office two years ago, his finance minister, Giulio Tremonti, has succeeded in enforcing a more prudent approach. The government responded to the global crisis with stimulus packages that helped keep budget deficits in 2008 and 2009 to half those of Greece.

Last month, alarm bells rang when it emerged that, for the first time in almost 20 years, Italy was running a "primary deficit": even before interest payments, government spending was exceeding revenue. But there was less disquiet in the markets than might have been expected, for two reasons: first, because Italy's private indebtedness is lower than most other developed nations'; and, second, because most Italian state debt is actually held by its own citizens. As Vaciago says: "Italians don't go to the bank to get a loan, but to buy government paper." This means that, proportionately, Italian bonds weigh less heavily than Greek government securities in the portfolios of foreign banks, and are arguably less easy to speculate against.

"[Italy] is the biggest bond market in Europe and the third largest economy. It is not Greece or Portugal," Kenneth Broux, markets economist at Lloyds TSB said.

A Carnegie Endowment report last week argued that the biggest threat to its public finances was the scant prospects for growth. Italy, it noted, had lost "as much competitiveness as Greece since joining the Euro area. Italy's unit cost of labour rose 32% from 2000 to 2009, comparable to Greece's 34% rise over the same period."

Historically, Italy has managed to export its way out of trouble. But there are doubts over whether it can do so this time: an EU report last year found that in the 10 years to 2008, exports of goods and services grew more slowly in Italy than in any other member country.

Structural reform might offer a way out. But, like all too many other southern European politicians, Berlusconi and Tremonti have been deeply reluctant to court the political unpopularity such changes would inevitably bring. "Not even when you have a centre-right government in this country do you get centre-right reform," said Vaciago.